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Suppose we have the following Treasury bill returns and inflation rates over an eight year period: Year Treasury Bills Inflation 1 9.87% 11.87% 2 10.76 15.36 3 8.48 9.69 4 7.78 7.43 5 8.30 9.69 6 10.63 12.15 7 13.49 16.34 8 15.31 16.22 a. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % c. What was the average real return for Treasury bills over this period?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $92,000 for the firm during the first year, and th..
Determine how much compensation (return) you expect to earn and how long will it take to pay back the return on this investment. Use the financial formulas, Net Present Value (NPV), Internal Rate of Return (IRR), and Payback.
Based on analysis of the company and expected industry and economic conditions, China imports is expected to earn 4.60 per share of common stock next year. The average price/earnings ratio for firms in the same industry is 8. Calculate the estimated ..
Inflation is expected to increase steadily over the next 10 years, there is a negative maturity risk premium on both Treasury and corporate bonds, and the real risk-free rate of interest is expected to remain constant. Which of the following statemen..
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and w..
The stock of Bruin, Inc., has an expected return of 17 percent and a standard deviation of 32 percent. The stock of Wildcat Co. has an expected return of 12 percent and a standard deviation of 47 percent. The correlation between the two stocks is .34..
Antonio's is analyzing a project with an initial cost of $41,000 and cash inflows of $26,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The pre-tax cost of debt ..
What is the next step in the financial planning process after a firm develops a sales forecast?
A stock index is currently 1,500. Its volatility is 18%. The risk-free rate is 4% per annum (continuously compounded) for all maturities and the dividend yield on the index is 2.5%. Calculate values for u, d, and p when a 6-month time step is used. W..
A foreign exchange arbitrageur notices that the Japanese yen to U.S. dollar spot exchange rate is ¥108/$ and the three-month forward exchange rate is ¥107.30/$. The three-month $ interest rate is 5.20 percent per Annum and the three-month ¥ interest ..
To find the future value of a single amount of money, the financial manager uses discounting. The amortization of a loan involves creating an annuity out of a present amount. The discount rate of a bond is synonymous with the bond's required return. ..
Primrose Corp has $19 million of sales, $2 million of inventories, $4 million of receivables, and $2 million of payables. Its cost of goods sold is 80% of sales, and it finances working capital with bank loans at an 6% rate. What is Primrose's cash c..
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